Trumka Outlines Lessons from the Financial Crisis

Washington, D.C.

Good morning everyone. Welcome.

It is great to have all of you here. Before I begin, I’d like to acknowledge Pia Bungarten of the Friedrich Ebert Foundation and Gustav Horn of the Macroeconomics Institute of the Hans Boeckler Foundation for partnering with the AFL-CIO in sponsoring today’s conference.

I also want to welcome Michael Sommer, who recently stepped down as head of the German Trade Union Federation to become vice president of the Friedrich Ebert Foundation.

Before I deliver the substance of my remarks this morning, I want to say a few more words about our dear friend Pia.

After five years directing the Washington office of the Friedrich Ebert Foundation, Pia will soon return to the foundation’s headquarters in Bonn to take up a leadership position there. Today’s event may well be her last public event in Washington.

Bonn’s gain will be Washington’s loss, and we at the AFL-CIO will feel that loss especially. Over the last several years, Pia has been a true citizen-ambassador for the Friedrich Ebert Foundation, for Germany’s Social Democratic Party and for Germany itself. She’s always fostered rich and meaningful dialogue on economics and foreign policy, always in the service of stronger trans-Atlantic relationships. Those relationships are truly an essential pillar of world peace and shared prosperity.

Here’s the thing: Politics and economics are team sports, but sometimes one person can make the whole league play better, and that’s what Pia did with regard to the quality of our political conversations and the depth of the relationships between the German and American labor movements.

Pia, thank you for your spirit, your integrity, your ideas and your work ethic, and good luck to you in your new assignment. You will always be welcome at the AFL-CIO, and I hope we keep in touch and continue to work together.

My friends, please join me in a round of applause for Pia Bungarten.

Last year, we held two conferences: first one in Washington and then a second in Berlin. The conferences had one theme—A Trans-Atlantic Agenda for Shared Prosperity.

Our charge, our responsibility, is to take the policy ideas from last year’s conferences and find ways to put them into practice in the United States and in Europe’s largest economy.

The financial crisis of 2008 and the Great Recession that followed are the worst economic events since the Great Depression of the 1930s. And in reality this crisis is not over. Just a month ago, we saw the European Central Bank adopt negative interest rates to head off the threat of EU-wide deflation. And yet, too many in the press, in think tanks, and most of all, in positions of political leadership, have returned to the pre-crisis mentality.

Quite frankly, that mentality has led to major policy failures causing needless suffering for millions of working people, men and women and families who lost homes and jobs and who will bear the pain of this Great Recession for decades to come.

In Europe, we all know the price of austerity as a response to economic crisis—unending economic crisis and, on the political side, a resurgence of right-wing authoritarianism as voters lose confidence in democracy itself.

What is less well known is how these same ideas have damaged the United States.

It has taken more than six years -- six years -- for the U.S. economy to reach the same number of jobs we had before the Great Recession started. The unemployment rate remains stubbornly high at 6.3%, which equals the peak rate during the recession in the early 2000s.

But the unemployment rate isn’t the full measure of what’s wrong with our labor markets. More and more people are dropping out of the labor force entirely. The rate of eligible workers in the labor force has dropped to about 63%, which is as low as it was in the late 1970s.

And most important, austerity has meant years of stagnating real wages for most of America’s workers. But this is not a new story—wage suppression has been at the center of the U.S. economy since the late 1970s. Over the decades since then we have seen brief moments of rising wages at the peak of debt-driven boom-bust business cycles, but stagnation has been the norm. This is a core pathology in our economy whose structures—everything from trade policy and monetary policy to our labor and employment laws—have been designed to keep wages from growing in tandem with workers’ productivity.

And now we see these same structures are operating on a global scale, keeping unemployment high, labor markets soft and worker bargaining power weak. The result is a fundamentally unstable and broken world economy, where deflation is an ever-present threat, and the only sources of growth are financial bubbles and international capital chasing ever-lower wages.

Of course, whether or not the global economy is broken depends on where you sit. For a relatively small number of people, this system has produced wealth beyond the dreams of Midas. And this makes many political leaders eager to find economic policies that both cater to this global economic elite and somehow address inequality. But there is no way to do that.

We see this in the schizophrenia of major international economic institutions like the International Monetary Fund and the OECD. As I have said elsewhere, on Monday they decry inequality and call for shared prosperity, and on Tuesday they defend austerity and attack workers’ rights.

Here in the U.S. we have a particular version of this problem—nostalgia for the 1990s. The 1990s were a time when for a few brief years it seemed like financial speculation actually could produce rising wages—that plutocracy could work for everyone. But it is clear today that those years were just a phase in a downward spiral—an economy built on falling wages and redistribution from working people to the rich, made tolerable with brief episodes of prosperity driven by asset bubbles. The 1990s might look like prosperity on paper, but it was fake debt-fueled bubble prosperity, and meanwhile financialization, corporate-oriented trade policies and weakening worker bargaining power eroded the foundations of shared prosperity. It was the kind of prosperity you ultimately pay for with a financial crisis and a collapse.

We cannot afford more efforts to find common ground between democracy and plutocracy.

And while this may be a tough message here in D.C., when you get outside of Washington, it turns out that all kinds of people are tired of the status quo of an economy that only works for a privileged few. Last week, Republican House Majority Leader Eric Cantor was at a fundraiser in Washington as his constituents voted in droves for his opponent, an unknown college professor. The pundits went nuts trying to figure it out, but it’s clear as day to me. Eric Cantor played the Washington game of obstruction to the hilt, and as his opponent frequently said, he was the man who put the “crony” in “crony capitalism.”

Regular people are sick of that game—no matter whether we are Democrats or Republicans. We’re sick of it. And we have figured out that the whole game amounts to flat paychecks for us while a handful of people get fantastically rich. And so I have good news, because here in America millions of people are finding a constructive outlet for our anger and dissatisfaction. Look at the growth of solidarity among fast food workers, among day laborers, taxi workers, TV writers, college graduates, Walmart workers, domestic workers, hotel workers and so many more.

At the same time my German friends tell me that a lot of people in Germany have learned that when workers have a real say in the economy the economy works better. And so even though Germany has a coalition government, that government is moving forward to create a minimum wage that is worth close to $12 an hour, and at the same time is looking at measures to strengthen collective bargaining and codetermination.

In every major economy, when we ask the question, “What have we learned from the crisis?” we face the issue of “Who is “we”?”

Economic elites seem to have learned that they can go on as they did before the crisis, accumulating wealth others created. Some politicians seem to think that they can keep carrying water for economic elites and still get the votes of the majority whose incomes keep falling. That, it seems to me, was Eric Cantor’s mistake. Others, the real leaders, respond to this great choice with a clear answer -- shared prosperity, rising wages, a restored democracy must come first.

Today, you will hear from one of those leaders, the chairman of the House Progressive Caucus, Keith Ellison. Keith, like Sens. Elizabeth Warren and Sherrod Brown and Mayors Bill De Blasio and Marty Walsh, clearly stands against plutocracy. These leaders have solutions that go beyond the hatreds and mythical ideologies that inspire the radical right here and in Europe. At the core of their program is one big idea—and that idea is shared prosperity.

Working people are ready to work—to pound the pavement—for political leaders who can show that they have learned from the crisis. And America has begun to have a long overdue national debate. If the chattering classes in D.C. would listen, they’d hear the echoes of the debate from Cantor’s district. We want this debate in every contest for state and federal office, in every country, and in the offices of every international organization. We want an answer to the simple question: What do we want our global economy to look like so it delivers shared prosperity?

Do we want it to be a plantation? Or a community?

That is a serious question, because in an age of global financial and economic integration, of imminent climate catastrophe, of environmental problems that become economic problems that become national security problems in a matter of days, our world simply cannot afford the plantation model any longer. It is a recipe for catastrophe. That in a nutshell is the lesson of the economic crisis.

And what does community look like? You all will discuss this today in detail, but let me offer a couple of suggestions.

First, in a community, there is full employment and everyone has access to a good job with decent conditions in an economy where wages rise with productivity.

Second, in a community we invest in public goods—the things that make the good life possible for all of us—from roads and bridges to high-speed rail to clean energy to world-class schools. And that should start with making sure everyone on our planet has access to the basics of modern life—from clean water to Internet access.

Third, in a community we all have a voice, on the job and at the polling place. And a voice on the job means the right to bargain together, as a union, with our employers.

Fourth, in a community we all pay our fair share in taxes.

And perhaps most importantly, in a global community, these principles apply everywhere. There should be no room in a global community for tax havens, or little principalities where dictators and hereditary monarchs torture workers who demand a living wage, or huge global economic powers that build the wealth of their national elites on impoverished and silenced workers—and by the way, I want you to think carefully about what countries I might be talking about in that last category.

If we hold to these principles, we can create a new global New Deal that ushers in a new day of shared prosperity and democracy. And that would be a legacy of the crisis worth defending.

I hope today we get to debate the agenda I have outlined. I am sure many of you have brought your own agendas to this discussion. What I hope we have in common here is that our answer to the question of what have we learned from the crisis is that we must have fundamental, structural economic change if we are to remake the global economy as a community and not a plantation.

Now, as you can see from the program, we have assembled an outstanding group of economists to speak on these issues. And at lunchtime we will hear from two distinguished policymakers – Congressman Keith Ellison, who is co-chair of the Congressional Progressive Caucus, and Michael Sommer, who is vice president of the Friedrich Ebert Foundation and former president of the German Trade Union Confederation.

The AFL-CIO is deeply honored to have the privilege of co-sponsoring such a distinguished gathering of policymakers and economic thinkers.

And now, let me turn the floor over to this morning’s panel. Thank you.